- 1 Will a Qualified Amended Return Fix the Problem (5 Facts)
- 2 Timing the Qualified Amended Return is Everything
- 3 QAR Does Not Protect Against Fraud
- 4 What about FBAR & FATCA?
- 5 Interaction with Notice 2022-36
- 6 Offshore Disclosure for International Issues
- 7 Golding & Golding: International Tax Lawyers Worldwide
Will a Qualified Amended Return Fix the Problem (5 Facts)
When a Taxpayer files an original tax return but then realizes that income was missed from the original return, they are supposed to go back and file an amended tax return to resolve the issue. Depending on the difference in the amount of income reported between the original return and the amended return, it could lead to penalties such as accuracy-related penalties — which could be substantial depending on the amount of income missed. Sometimes, filing a Qualified Amended Return (QAR) can fix the problem – but not always. In the recent case of Lamprecht (summarized here) – there are certain timing issues to consider when filing a Qualified Amended Return. In addition, if a taxpayer’s original tax return involved a fraudulent position, then the QAR penalty avoidance rules would not provide protection. Fraudulent Taxpayers would instead look to the IRS Voluntary Disclosure Program (VDP) for help – which is designed to assist taxpayers who are fraudulent/willful. Let’s look at five key facts about filing a Qualified Amended Return.
Timing the Qualified Amended Return is Everything
In order to meet the requirements of filing a Qualified Amended Return, the taxpayer must be sure to submit the QAR timely. For example, in the recent case of Lambrecht, there was an issue involving a John Doe summons that was issued to a Swiss Bank. One of the key arguments in the case involved the timing of filing the amended return in conjunction with the issuance of the John Doe summons. In this case, the court ruled against the taxpayers and found that they did not meet the timing requirements for the QAR.
QAR Does Not Protect Against Fraud
This is one very important aspect of filing a Qualified Amended Return that taxpayers cannot take lightly. If a Taxpayer was fraudulent and failed to include all of their income in the original return, then they will not be able to rely on the Qualified Amended Return in order to avoid penalties. Taxpayers could try to argue that a portion of the missed income was not fraudulent — but parsing out fraud vs non-fraud on the same tax return is a steep and difficult hill to climb.
26 CFR Section 1.6664-2 (Underpayment)
(2) Effect of qualified amended return.
The amount shown as the tax by the taxpayer on his return includes an amount shown as additional tax on a qualified amended return (as defined in paragraph (c)(3) of this section), except that such amount is not included if it relates to a fraudulent position on the original return.
What about FBAR & FATCA?
The Qualified Amended Return rules do not specifically provide any penalty relief for missed international information reporting forms such as FBAR and FATCA. Taxpayers who may have missed these filing requirements will want to consider all of the available late-filing options before submitting amended tax returns to the IRS.
Interaction with Notice 2022-36
In August 2022, the IRS issued Notice 2022–36, which is designed to assist taxpayers with filing certain late forms. Taxpayers who submit a Qualified Amended Return will want to take note of the different requirements and penalty waivers available under Notice 2022–36. While technically the IRS indicated in the Notice that the penalty waiver should be automatic, taxpayers should still consider putting the IRS on notice along with their submission. It is important to note that Notice 2022-36 does not include penalty waivers for FBAR or FATCA.
Offshore Disclosure for International Issues
Taxpayers who may have missed one or more international reporting forms may want to consider different options other than just submitting a Qualified Amended Return. Taxpayers may also want to consider offshore disclosure options such as the Streamlined Procedures or the Voluntary Disclosure Program and speak with a Board-Certified Tax Law Specialist that specializes exclusively in offshore tax matters before making a submission.
Golding & Golding: International Tax Lawyers Worldwide
Our FBAR Lawyer team specializes exclusively in international tax, and specifically IRS offshore disclosure.
Contact our firm today for assistance.